New Homes Quality Code sets standards for developers and new home buyers
Market Insight 07 February 2022 07 February 2022
UK & Europe
UK Real Estate Insights
The New Homes Quality Board has published a New Homes Quality Code to improve the quality of new build homes and to fill the gaps in current customer protections to ensure that every aspect of a new home purchase, through to two years after the purchase of the home, is covered.
The New Homes Quality Board (NHQB) is an independent not-for-profit body created by the government in May 2020 to develop a new framework to oversee reforms in the build quality of new homes and the customer service provided by developers in the UK.
Under the New Homes Quality Code (the Code), which will replace the current Consumer Code for Home Builders, housebuilders and developers have until 31 December 2022 to register with the NHQB and advise their customers whether the provisions of the Code apply to their new home. They will then have to complete training and have the necessary complaints and other procedures in place to meet the requirements of the Code. Although registration with the NHQB and adoption of the Code will not be a legally binding requirement, it will effectively be compulsory because it will be required by many new home warranty providers and is likely to be a requirement of lenders. It is seen as a part of an overall move towards imposing greater scrutiny on the housebuilder industry alongside other measures such as the Building Safety Bill.
The Code applies to any individuals buying a new home as their own residence. Other groups of buyers will be considered in future codes or amendments to potentially include shared owners and those purchasing a new house as a Buy to Let.
Once registered, developers will have to comply with the requirements of the Code and be subject to the authority of the New Homes Ombudsman Service (NHOS), once established. The NHOS will have powers to require them to undertake work or rectification measures and to award compensation to enforce the Code.
The Code establishes ten fundamental principles which must be adopted by Registered Developers and complied with. These include treating customers fairly and acting in a transparent and independent manner.
The Code is then divided into four parts:
- Part One - Selling a New Home - requires accuracy in sales and marketing information, prohibits high-pressure selling techniques, seeks to safeguard vulnerable customers and make relationships with, and recommendations of, legal advisers more transparent.
- Part Two - Legal Documents, Information, Inspection and Completion - seeks to prescribe more detailed requirements in relation to early bird arrangements, reservation agreements, pre-contract information and contracts of sale, pre-completion inspection, legal completion and repayment of financial deposits.
- Part Three - After-Sales, Complaints Management and a New Homes Ombudsman - extends protection for customers following the purchase of a new home by requiring registered developers to provide a comprehensive and accessible after-sales service (including a more prescribed procedure for dealing with snagging) and a complaints resolution process.
- Part Four - Solvency, Legal and Jurisdiction - requires registered developers to ensure that they are financially adequately established or insured so as to provide reasonable protection against insolvency. They are required to ensure they have the capacity to meet their obligations under the Code, including timely repayment of deposits which may need to be repaid and meeting any financial awards by the Ombudsman.
In each part, the Code provides details of practical steps expected to be complied with at each stage of the new home sale process. The NHQB has also published detailed developer guidance further clarifying their expectations.
Is the sector ready for the new Code?
Market commentary suggest that many larger national developers are already putting plans in place to manage the transition. However, small and medium developers will need support to understand the implication for an independent complaints process and implement the Code’s new requirements. Many such smaller developers may currently be blissfully unaware of the new Code, but should act now to avoid storing up complications and delays in their sales processes.